Oregon Office of Economic Analysis

When economists talk about growth, we almost always are referring to net growth. There is considerable amounts of churn in the economy every single day. Roughly, 12% of jobs are either being gained or lost at any given point. What we’re concerned about is whether the good news outweighs the bad news, or vice versus. Even though we focus less on the gross flows, they still can provide insights and highlight important trends. This could be especially important at a point in time like today when job growth has slowed considerably over the past couple of years.

Let’s first look at job availability in Oregon. The number of open positions that firms are looking to fill tells us something about how companies view their current workforce needs and also how they view the future. Here we have have three different measures that are, unfortunately, telling us three somewhat different stories.

That said, in the big picture it’s clear that firms are holding steady their number of available jobs at best, but more likely pulling back on their number of openings, or at least advertised openings. Our office uses the help wanted online ads as part of our leading indicator model and the declines in recent years does weigh on that index of future growth.

Now, the question is are firms actually looking to hire fewer new workers or are they simply advertising their openings less? That unknown answer matters quite a bit on how to interpret the data for the outlook. If firms are hiring less because their sales are slow or expected to be slow in the future then it would signal trouble. However if they are advertising their openings less because they know its a tight labor market and its hard to fill positions, then the implication is more benign and less malignant. While we can discount the state JOLTS data — it’s largely a sharedown from national and regional data — the national JOLTS data does point more toward the latter than the former. Job openings are weakening, yes, but only after years of very significant gains, and national hiring patterns are holding up better as well.

Now, what about the other side of the ledger? Are firms laying workers off at a higher rate or just hiring them at a slower pace? We lack timely data here, but one indicator is looking at Worker Adjustment and Retraining Notifications (WARN) where firms let public agencies know they are downsizing or laying folks off. This is publicly available information and lately the numbers are elevated.

That said, this is clearly an imperfect measure. WARN notices in recent months are on par with readings we’ve seen a few times so far this expansion, or at times when job growth remained quite strong and the unemployment rate was dropping. WARN notices also do not add up to much in the grand scheme of things. Even during the Great Recession, WARN notices only totaled around 11,000 jobs or so, even though the state overall lost nearly 150,000. They are one indicator, certainly, but at the same time they do not appear to be a leading indicator of where we are headed.

One measure that is a good leading indicator for the economy is the number of initial claims for unemployment insurance. These figures capture two effects. The biggest one being they are a measure of layoffs in the economy. Around 96% of all jobs are covered by unemployment insurance, so folks who file claims are representative of the overall labor market. This also includes people impacted by firm decisions that may not meet the technical thresholds required to file a WARN notice like those seen above.

The second, smaller effect captured by UI claims is worker behavior. If an individual is able to quickly land another job, they may not take the time and effort to fill out the paperwork, file a claim, and wait for their payments. On the other hand, if an individual believes it will be harder to find another job quickly, or maybe they search for a week or two and then file a claim, we could see these figures rise not just because layoffs are higher, but because hirings are weaker.

The good news overall is that initial claims for unemployment insurance remain near historic lows. Despite the largest economy, workforce, and population in Oregon’s history, initial claims are basically lower than ever. This should bode well for future growth in the months ahead.

The one potential issue here is that claims are somewhat elevated in 2019 relative to 2018, at least in Oregon. Prior to each of the past two recessions, these initial claims jump up and run about 10-15% higher on a year-over-year basis. This increase occurs about 8-12 months prior to the official start date of the recession. Today, claims are running more like 5% higher on a year-over-year basis. Clearly we’re not at a similar threshold as the past two cycles, but any increase is certainly worth monitoring in the weeks ahead. A complicating factor here is a handful of the announced layoffs will be hitting the time of year when seasonal work ends and UI claims increase anyway. We know WARN notices in and of themselves do not tend to move the needle in the big picture, but may make it harder to interpret the data in the weeks ahead.

Bottom Line: Job growth in Oregon is slower today than in recent years. Most signs point more toward an economy that is closer to full employment and it being harder for businesses to find the labor, even though they want to grow. However there are a few potential worrisome signs. The number of job postings is flat at best and initial claims are just a hair above their year-ago readings. Should these patterns continue or of course worsen, then we should be more concerned. However, today there are not many red flags that a recession is imminent *knocks on wood*. The broad array of leading indicators are not plunging.

Furthermore, while initial claims is one of the top two or three indicators available, it is unclear whether a small increase is a warning sign or just part of the noise. If we look back two charts and examine the 1990s, there was nearly a decade’s worth of ebbs and flows around a very low number of claims during a long economic expansion. Only when claims spiked significantly in 2000 was it a clear warning sign. Bringing more comfort and possibly clarity, the rise in initial claims is not seen in the U.S. data. In fact 2019 is running just a hair lower than 2018. The expansion remains intact, at least for now.